David Hisco departed ANZ after a probe. Photo / Anthony Au-Yeung
David Hisco departed ANZ after a probe. Photo / Anthony Au-Yeung
The actions of the CEO and subsequent silence and obfuscation by the board are extremely disconcerting says Simplicity's Sam Stubbs.
An independent inquiry is justified to address the culture and conduct issues exposed by the Hisco affair say one-third of respondents to the Herald's 2019 CEOs survey.
The "Hisco affair"rocked the market when ANZ NZ chair Sir John Key announced the chief executive of New Zealand's largest, most profitable bank had departed after a probe found he had charged the personal use of "chauffeured cars" to the bank.
The bank had earlier been censured for incorrectly attesting to risk compliance over five years.
The Reserve Bank requires banks to maintain a minimum amount of operational risk capital relative to the risk of each bank's business. ANZ's right to use its own risk model was removed.
The upshot was severe embarrassment for Key and other directors who had attested the bank had complied with regulations. Key later admitted to the Herald that the board had failed in its due diligence obligations to the Reserve Bank.
Sir John Key, Chairman of ANZ Bank. Photo / Supplied
A major funds chief said it has probably reached the stage where some kind of inquiry may be required just to restore confidence back in the system. "We need a healthy system. It is though very unlikely that significant systemic issues will be uncovered."
"We have to know that New Zealanders are getting the full benefit of a competitive banking market and that the profits extracted are fair and appropriate to the risk," said Foodstuffs' Chris Quin.
"I suspect the CEO was an extreme example," said an agribusiness boss. "However the Australian banking sector review highlighted systemic issues that are probably also present in New Zealand."
A subsequent leak threw more shade on Hisco's reputation when it was revealed ANZ had failed to disclose that Hisco's wife had bought a plush St Heliers house for less than the bank paid for it.
But it also resulted in a Financial Markets Authority inquiry which said the sale should have been disclosed as a related party transaction in its 2017 financial statements — a view the bank's board contested, saying the sum involved was not material.
"ANZ is still defending an untenable position with respect to no disclosing the related party transaction," said an energy sector boss.
"The actions of the CEO and subsequent silence and obfuscation by the board of our biggest bank and most profitable company are extremely disconcerting," claimed Simplicity CEO Sam Stubbs, who has been outspoken over the need for an inquiry. "It sets a very poor precedent for corporate governance in New Zealand. If KiwiSavers are going to be happy investing around another $75b in New Zealand capital markets over the next 10 years, they must know that recent bank actions will be dealt with effectively by regulators and politicians."
A tech services head wanted the CEO further held to account, the wife's house sold and any gain on monies paid back. "This was an unforgivable misuse of funds and leaders of NZ companies should be demonstrating the highest levels of personal and public integrity."
But most respondents — 55 per cent — do not support an inquiry.
"We don't need a multimillion-dollar inquiry to confirm what we already know — a high-profile CEO, poorly motivated, has been found out taking advantage of weak governance processes resulting in him losing his job and damaging the reputation of his employer," said a media boss.
"We don't need another inquiry," said independent director Cathy Quinn. "I believe all businesses have sought to learn from the Australian Royal Commission Inquiry, the APRA Report and other issues. It would be great for the professional service firms but no one else. All boards are very focused on culture and conduct in light of this report. An inquiry will take a backward view when organisations are already looking forward and proactively looking to make appropriate changes where necessary."
An insurer agreed, saying allow the Royal Commission insights and actions from Australia to be reviewed and applied in New Zealand. "This is a sound and reasonable approach the Reserve Bank and FMA are undertaking." A leading banker pointed out the earlier Reserve Bank and FMA review of culture and conduct showed no systemic conduct issues in the banking and Iife insurance sectors.
Said Dame Alison Paterson. "The FMA is already very focused on conduct and culture and enhanced 'whistle-blowing' processes should flush out anything untoward. There should be care to emphasise the materiality definition."
Other had a more pungent view.
"David Hisco's behaviour was appalling. But there are already FMA, RBNZ and APRA reviews under way.
What benefit would a fourth review bring?," questioned a director.
ICBC NZ chair and former Reserve Bank Governor Don Brash underlined that nothing the ANZ Bank did had the "slightest impact on the financial soundness of the bank, let alone the soundness of the banking system. Nor did it have any impact on ANZ Bank customers."
Mainfreight's Don Brash said leave the banks to sort their integrity out "with customers deciding if they have or not".
But, cautions the LGFA's Craig Stobo, the NZ banking sector is "one more misdemeanour away from a Royal Commission of Inquiry".
